From volume to value: an introduction to Value-Based Healthcare

This article aims to introduce the six pillars of VBHC and some practical examples of implementation in the real-world.

From volume to value: an introduction to Value-Based Healthcare 1

Healthcare systems around the world are struggling. With a growing, ageing population and the associated increase in patients with multiple chronic conditions, the cost of healthcare has never been so high. There is an urgent need for holistic, sustainable and scalable solutions enabling all stakeholders involved to deliver high-quality care while keeping costs under control.

Healthcare leaders and policymakers around the world have tried countless incremental fixes – tackling fraud, reducing errors, enforcing clinical guidelines and making patients better ‘consumers’.1 So far, none of these initiatives has resulted in an in-depth, durable transformation of healthcare systems. A change of paradigm and the way we think about success in healthcare is urgently needed.

This article explores a possible way forward: Value-Based Health Care (VBHC). By shifting the focus away from volume to value, Michael Porter and Elizabeth Teisberg propose a new direction. This article aims to introduce the six pillars of VBHC1 and some practical examples of implementation in the real-world:

  1. Organise into Integrated Practice Units (IPUs)
  2. Measure outcomes and costs for every patient
  3. Move to bundled payment for care cycles
  4. Integrate care delivery across separate facilities
  5. Expand excellent services across geography
  6. Build an enabling information technology platform

Value-based healthcare is not a new idea. In 2006, Michael Porter and Elizabeth Teisberg published “Redefining Health Care: Creating Value-Based Competition on Results”2 which set in motion what has now become a global movement.

At the core of the VBHC approach lies the way healthcare providers are reimbursed. Contrary to the traditional fee for service where providers receive payment based on services delivered (medically justified or not), value-based care shifts the emphasis from volume to value. In this framework, value is defined as the health outcomes achieved by the patient against the cost of providing services to deliver those outcomes.

By taking the focus away from volume, this equation incentivises an effective care delivery prioritising outcomes that matter to patients. Porter proposes six levers to enable the delivery of high-value care, which you can see in the following info graphic:

From volume to value: an introduction to Value-Based Healthcare 2

1. Organise into Integrated Practice Units (IPUs)

The current hyper-fragmented healthcare systems are not organised around the patient, but mostly around hospital departments. Navigating this complex environment can result in delays in diagnosis, treatment and significantly disrupt patients’ lives and increase costs. To increase expertise and efficiency, Porter proposes to organise care around medical conditions over the full cycle of care and deliver services in what he calls Integrated Practice Units (IPUs). 

IPUs involve a dedicated multidisciplinary team, preferably co-located, and associated infrastructure to deliver care for patients affected by a specific condition or a set of closely related conditions (e.g. diabetes and associated kidney disorders). In this setting, clinical leadership is well defined, care pathway resources adequately coordinated and accountability for results shared amongst the team members and providers.

2. Measure outcomes and costs for every patient

Measurement of outcomes and costs are at the core of the value-based health care agenda. 

Patient outcomes are the result of a complete treatment pathway. They are essential to enable patients to make informed choices regarding where to receive care and for providers to improve quality. Outcomes should be condition-specific, multidimensional, reported by both clinicians and patients, and risk-adjustment factors taken into account. Porter proposes three tiers for outcome measurement: survival, process of recovery (incl. complications) and long-term sustainability of health.

Regarding costs, Porter recommends taking into account emerging costs (not only the billable ones) for all procedures and personnel deployed for each case – including management of any complications, recurrences or medical errors. 

Outcomes and cost measurement value is maximised when recorded continuously over time and made publicly available. Transparency enables providers to compete on value – not on price – and therefore raise the overall standard of care and accelerate innovation.

3. Move to bundled payment for care cycles

The bundled payment model consists of a flat-rate reimbursement for all the services performed by a provider to treat a patient undergoing a specific episode of care defined by a particular condition or period. Bundled payment encourages the careful allocation of resources, the shared responsibility of all parties involved, and emphasises the recovery of the patient. 

4. Integrate care delivery across separate facilities

System integration aims to eliminate fragmentation and duplication of care, and to optimise the services delivered at each location, the rationale being that limiting the scope of service and concentrating volume in a limited amount of sites will result in deepened expertise and better outcomes.

5. Expand excellent services across geography

Disseminating excellent care models across a defined region is a crucial element of value-based healthcare. Increasing the reach of top-performing providers to serve a more significant patient population can be achieved by two models:

6. Build an enabling information technology platform

Technology is a critical enabler in the delivery of the value-based care agenda. The healthcare IT landscape is complex, with providers using a variety of solutions for each department, location, type of data. Without a suitable digital platform, the proposed changes would hardly be feasible. Such a platform would enable the collection and sharing of patient-centred, standardised and structured data.

Implementing Value-Based Healthcare 

The framework proposed by Porter is very general and tells us what to expect from VBHC in an ideal situation. However, the real world is more complex, and the implementation of these concepts may vary from a healthcare system, hospital or condition to another. For example, it remains unclear how VBHC can enable effective care delivery for patients with chronic, multiple comorbidities. 

Nevertheless, some promising projects demonstrate that implementing VBHC is feasible and beneficial to both patients and providers. For example, the Martini-Klinik in Germany has been a pioneer and role model in running a successful IPU for prostate cancer and achieving outstanding outcomes.3

In the PROMoting Quality project, providers and payers are collaborating to investigate the use of Patient Reported Outcome Measures (PROMs) for cost effectiveness and for the early detection of post-surgical complications. 

More projects are on the way, and at heartbeat we are proud to have supported more than one hundred hospital departments in their journey toward value-based healthcare by making PROMs collection efficient and actionable.

From volume to value: an introduction to Value-Based Healthcare 3
Written by
Yannik Schreckenberger

Co-founder & CEO of heartbeat, former Hacking Health Berlin lead organiser, physicist and tech enthusiast.

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  1. Porter, Michael E., and Thomas H. Lee. “The Strategy That Will Fix Health Care.” Harvard Business Review 91, no. 10 (October 2013): 50–70.
  2. Porter, M.E. and Teisberg, E.O., 2006. Redefining health care: creating value-based competition on results. Harvard Business Press.
  3. Porter, M.E., Deerberg-Wittram, J. and Marks, C., 2014. Martini Klinik: prostate cancer care.